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Let’s Build a Better Data Economy

Yan CARRIÈRE-SWALLOW AND Virkam HAKSAR

Our digital footprint generates enormous value, but too much of it ends up in Big Tech silos

Humanity has never been so comprehensively recorded. Smartwatches capture our pulse in real time for a distant artificial intelligence (AI) to ponder the risks of heart disease. Bluetooth and GPS keep track of whether some of us shop at gourmet stores and linger in the candy aisle. Our likes and browsing hours on social media are harvested to predict our credit risk. Our search queries on shopping platforms are run through natural language processors to generate uniquely targeted ads whose unseen tethers subtly remold our tastes and habits.

The generation and collection of data on individual human beings has become a big part of the modern economy. And it generates enormous value. Big data and AI analytics are used in productivity-enhancing research and development. They can strengthen financial inclusion. During the pandemic, data on real-time movements of entire populations have informed policymakers about the impact of lockdowns. Contact tracing apps have notified individuals who have been in potentially dangerous proximity to people infected with COVID-19.

But just as data have helped us monitor, adapt, and respond to COVID-19, the pandemic has brought into focus two fundamental problems with how it flows in the global economy (Carrière-Swallow and Haksar 2019). First, the data economy is opaque and doesn’t always respect individual privacy. Second, data are kept in private silos, reducing its value as a public good to society.

 

Whose data anyway?

 

Once the GPS, microphones, and accelerometers in the smart devices located in every pocket and on every bedside table and kitchen counter begin monitoring our behavior and environment, where do the data go? In most countries, they are collected, processed, and resold by whoever can obtain them. User consent is all too often granted by checking a box below lengthy legalistic fine print—hardly a means to serious informed consent. Analysis based on such granular data is a gateway to influencing behavior and has tremendous commercial value. To be sure, this is not a one-way street: consumers get many nice data-driven features for no direct financial cost in exchange. But are they getting enough?

Most transactions involving personal data are unbeknownst to users, who likely aren’t even aware that they have taken place, let alone that they have given permission. This gives rise to what is known in economics as an externality: the cost of privacy loss is not fully considered when an exchange of data is undertaken. The consequence is that the market’s opacity probably leads to too much data being collected, with too little of the value being shared with individuals.

By agreeing to install a weather application and allowing it to automatically detect its current city, people might unwittingly allow an app designer to continuously track their precise location. Users who sign up for a weather forecast with a sleek interface agree to share their location data, believing it’s just to enable the app’s full functionality. What they are providing, in fact, is a data trail about their daily routine, travel itinerary, and social activity. The weather forecaster may never get any better at predicting rain but could end up with a better prediction of the user’s creditworthiness than the scores compiled by traditional credit bureaus (Berg and others 2020).

 

Privacy paradoxes

 

Do we care about our privacy or not? Researchers have documented what is known as a “privacy paradox.” When asked to value their privacy in surveys, people frequently rank it as a very high priority. However, in their daily lives, these same people are often willing to give away highly sensitive personal data for little in exchange.

Why are people willing to hand over their location data in exchange for a weather forecast, but not to share it to protect their health?

This paradox should have heralded good news for contact tracing apps, which rely on widespread usage to be effective (Cantú and others 2020). Unfortunately, in many countries where use of these tools is voluntary, take-up has been very low. Why are people willing to hand over their location data in exchange for a weather forecast, but not to share it to protect their health while helping fight a global pandemic that has killed over 2 million people? One reason may be that—unlike the weather app makers—public health agencies have designed their contact tracing apps to transparently announce how they will be collecting and using data, and this triggers concerns about privacy. Another reason is that authorizing governments to combine location information with data on a disease diagnosis may be seen as particularly sensitive. After all, knowledge of someone’s preexisting condition could lead to their exclusion from insurance markets in the future or open the door to other forms of stigma or discrimination.

 

How to use responsibly

 

The data generated by our smart devices are essentially a private good held by Big Tech companies that dominate social media, online sales, and search tools. Given how valuable these data are, it is not surprising that companies tend to keep them to themselves (Jones and Tonetti 2020). As more data beget better analysis, which in turn attracts more usage, more data, and more profits, these swollen data war chests fortify their platform networks and potentially stifle competition.

This finders keepers model tends to lead to too much data being collected, but the data are also insufficiently utilized exactly when they could be most helpful, kept in private silos while public needs remain unmet. Data sharing can support the development of new technologies, including in the life sciences. Consider how epidemiological research can benefit from scaling up big data analytics. A single researcher analyzing the experience of patients in their home country may be a good start, but it cannot rival the work of many researchers working together and drawing on the experience of many more patients from around the world—the key to the success of a number of cross-border collaborations.

How can data be made more of a public good? Commercial interests and incentives for innovation must be balanced with the need to build public trust through protection of privacy and integrity. Clarifying the rules of the data economy is a good place to start. Significant advances have resulted, for example, from the 2018 implementation in Europe of the General Data Protection Regulation (GDPR), which clarified a number of rights and obligations governing the data economy. EU residents now have the right to access their data and to limit how it is processed, and these rights are being enforced with increasingly heavy fines. But even as researchers have started to see the impact of the GDPR on the digital economy, there are still concerns about how to operationalize these rights and keep them from being simply a box-checking exercise.

People should have more agency over their individual data. There could be a case to consider the creation of public data utilities—perhaps as an outgrowth of credit registries—that could balance public needs with individual rights. Imagine an independent agency tasked with collecting and anonymizing certain classes of individual data, which could then be made available for analysis, subject to the consent of interested parties. Uses could include contact tracing to fight pandemics, better macroeconomic forecasting, and combating money laundering and terrorism financing.

Policies can also help consumers avoid becoming hostage within individual ecosystems, thus contributing to market contestability and competition. The European Union’s late-2020 proposals for the Digital Markets Act and the Digital Services Act have many new features. These include third-party interoperability requirements for Big Tech “gatekeepers”—including social media and online marketplaces—in certain situations and efforts to make it easier for their customers to port their data to different platforms.

Policies also have a role to play in keeping data secure from cyberattacks. An individual company does not fully internalize the harm to public trust in the entire system when its customers’ data are breached, and may thus invest less in cybersecurity than what would be in the public interest. This concern has special resonance in the financial system, where maintaining public confidence is crucial. This is why secure infrastructure, cybersecurity standards, and regulation are essential pillars of the open banking policies many countries have adopted to facilitate interoperability in sensitive financial data.

 

Global approach

 

Many countries have been developing policies aimed at a clearer, fairer, and more dynamic data economy. But they are taking different approaches, risking greater fragmentation of the global digital economy. These risks arise in many data-intensive sectors, ranging from trade in goods to cross-border financial flows. In the context of the pandemic, differing privacy protection standards make it harder to collaborate on crucial medical research across borders—true even before the pandemic—because of the difficulty of sharing individual results of biomedical trials (Peloquin and others 2020).

Global coordination is always a challenge, especially in an area as complex as data policy, where there is a multitude of interests and regulators even within individual countries, let alone across borders. Dealing with the fallout of the pandemic has spurred a new opportunity to ask hard questions about the need for common minimum global principles for sharing data internationally while protecting individual rights and national security prerogatives.

The current moment also affords an opportunity to explore innovative technological solutions. Consider whether jump-starting the recovery in international travel could be facilitated by a global vaccine registry. This could leverage old-fashioned paper-based international health cards but would call for development of standards and an interoperable data management system for reporting and consulting on people’s vaccination status—potentially linked to digital identity—as well as agreements on protection of individual privacy and barriers to access for other purposes.

There is a strong case for international cooperation to ensure that the benefits of the global data economy can build a more resilient, healthier, and fairer global society. To find a way forward together, we can start by asking the right questions.

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UNCTAD

An assessment of the e-commerce ecosystem in Côte d’Ivoire will help businesses in the sector adapt to COVID-19 challenges and comply with new regulations.

UNCTAD’s eTrade readiness assessment of Côte d’Ivoire, launched on 8 April, will help the country’s e-commerce businesses better adapt to the consequences of the COVID-19 pandemic and comply with new regulations, according to one of the country’s leading digital entrepreneurs.

Patricia Yao, founder and chief executive officer of QuickCash, a platform providing mobile payment services to rural customers, said the assessment would help policymakers and businesses better understand the impact of COVID-19 on the sector.

“The assessment will help us adapt the responses of the digital ecosystem in Côte d’Ivoire, taking into account the challenges and opportunities raised by the current crisis,” said Ms. Yao, UNCTAD’s e-Trade for Women Advocate for west Africa.

Progress and challenges

The assessment found that Côte d’Ivoire has made significant progress in recent years to improve access to the digital economy and e-commerce.

The country’s digital economy program is integrated into its national development plan and includes the digitalization of a series of financial as well as government services.

It also includes and the expansion of critical information and communications technology infrastructure, with the implementation of a national broadband network project.

Despite these important strides, and its relatively vibrant economy, Côte d’Ivoire needs to tackle the challenges hindering its e-commerce growth.

These include costly and limited internet access, inefficient physical addresses, low public awareness on online commerce and limited digital skills of micro, small- and medium-sized businesses to effectively engage in e-commerce activities.

“It’s important to take priority actions to accelerate digital transformation in Côte d’Ivoire and allow e-commerce players to seize available opportunities. This is especially important in the wake of COVID-19 and in an increasingly integrated west African region,” said UNCTAD Acting Secretary-General Isabelle Durant.

“The valuable recommendations of this report will provide an important framework for future policy action, with a view to accelerating e-commerce uptake in the context of the COVID-19 pandemic,” said  the country’s trade and industry minister, Souleymane Diarrassouba.

Consultative process

The assessment report is a product of a consultative process that brought together representatives of the government, the private sector and development partners.

Ms. Yao said the assessment’s multi-stakeholder approach would facilitate the implementation of future regulations and policies.

“By bringing all the concerned actors around the table, it will be easier to implement new measures because they have been previously discussed and agreed upon,” she said. “In the past, when new laws were adopted, they were difficult to comply with because those affected hadn’t been involved in their formulation.”

The assessment was funded by the German government and prepared in cooperation with the Universal Postal Union, International Trade Centre and Consumers International.

UNCTAD has conducted such assessments in 27 countries, fostering coordination and dialogue between various stakeholders and helping them overcome structural barriers to make e-commerce an engine of inclusive and sustainable development.

An assessment of the e-commerce ecosystem in Côte d’Ivoire will help businesses in the sector adapt to COVID-19 challenges and comply with new regulations.

WEF
  • Global tax policy on digital services has to be multilateral – and should be more carrot than stick, Josh Kallmer, Zoom’s Head of Global Public Policy and Government Relations has said.
  • He was speaking at the World Economic Forum’s Global Technology Governance Summit hosted by Japan.
  • The OECD is making progress on agreeing a set of principles to revolutionize the taxation of multinationals, as well as better taxation of the digital economy.
  • Zoom profits soared in 2020, as working from home became the norm in the COVID-19 pandemic.
  • Some European OECD countries have already implemented Digital Services Taxes – and the US has set out plans for a global minimum corporation tax.

Zoom chief Josh Kallmer has called for a multilateral rethink of tax policy, that recognizes how much the world has become digitized, but also encourages new, smaller innovators.

He said: “We’d really like to see a multilateral solution with all the players at the table leaning into the idea that the way the economy is now, it demands answers to these questions. We want to avoid the unilateral approaches that so many markets are taking.

“This debate is thinking about tax policy as a stick, that may be unfair, it has an important role to play. But is there a way potentially to look at tax policy as a set of carrots, ways to encourage activity we want to encourage, like innovation and actual physical investments in certain markets.

“That’s a conversation that Zoom would be very eager to have. We’re committed to the growth and development of markets around the world and working with governments to get there. We want to find creative, coordinated, multilateral ways of getting there.”

‘Multilateralism at stake’

“If there were ever an issue that was fundamentally international, where the cross-border interdependence was so undeniable, it’s this,” Kallmer added, during a session on Taxing Digital Value.

“Ultimately, whether you’re looking at revenue or income, there’s a fixed amount of money in the world and we have to have a principled, coherent, consistent way to determine how to allocate taxing rights with respect to that.

“And it’s not just the global tax system that’s at stake, it’s the concept of multilateralism, the concept of cooperating together to meet the challenges that we all face now.”

In the past year, Zoom has arguably become one of the world’s biggest digital companies.

With COVID-19 lockdowns forcing stay-at-home orders across the globe, working from home became the norm and use of the communications tool skyrocketed as meetings went virtual.

Sales leapt by 326% to $2.6 billion in 2020, seeing profits go from $21.7 million in 2019 to $671.5 million in 2020.

From Zoom’s perspective, Kallmer said it was also important that digitization was viewed “as a whole” in discussions on tax.

“Certainly there are some companies that are very significant players, but we’re dealing with a larger phenomenon where it’s not just internet platforms, but services companies of all kinds providing services across borders digitally, often with no physical place of business, so it goes beyond a small group of admittedly very important countries.”

Digital Services Taxes in Europe
Digital services taxes have been implemented in parts of Europe.
Image: KPMG-Tax Foundation

Digitization has changed the playing field

In the last two decades, the notion of ‘permanent establishment’, of a physical place of business as the anchor for allocating taxing rights, has “lost some of its utility”, he added.

“It’s still an important concept and fixture in the set of international tax norms, but there is certainly an appreciation within Zoom and across the global tech sector as a whole that digitization has legitimately changed the playing field and that governments have legitimate questions about how to respond.”

Earlier this week, the US treasury announced plans for a global minimum corporation tax, which has been backed by the EU.

The OECD has already been working on a two-pillar global taxation scheme for some time, with two pillars that address taxing companies where they make profits even if they do not have a physical presence there.

The second pillar of the OECD scheme, reports Reuters, is to establish a global minimum tax rate, which could apply to all companies, so that governments do not compete with each other offering lower taxes to attract large multinational firms.

Kallmer, the former Executive Vice President, Policy, Information Technology Industry Council (ITI), said there are some very real competition-related, and in the US, anti-trust related questions happening in the global economy, in the technology sector and other settings.

“From Zoom’s point of view, as still a relatively small company, in a relatively competitive environment we’re following those issues, we care about the outcomes of those discussions.

“We all agree the economy has changed in ways that make re-examining global tax issues appropriate. But we may have some differences on how to get there.”

Challenges and shared problems

Kallmer highlighted key challenges in the tax debate, including the prospect of double or multiple taxation.

“If you don’t have clear rules of the road agreed among countries that are essentially battling over the same quantity of revenue or profits, you have the very real prospect of that happening.”

There’s a potential penalty for small innovative companies, as some Digital Service Taxes don’t have minimum revenue thresholds, he said.

“So you have small companies, many of whom don’t make a profit for many years, who could potentially be within scope and taxed on revenue that is not part of an overall profit-making effort.”

Administration and implementation are also factors: “It’s no small feat, even for a relatively large company, to re-engineer their financial reporting to comply with greatly varying rules from market to market, so there’s a deadweight loss there, that occurs.”

He said his final point goes beyond tax to how we tackle all shared global problems. “When individual markets depart from a multilateral approach, it affects the larger global environment as well, it affects trade policy… it’s reasonable to expect that it would affect things like how we fight climate change, truly shared problems that we need to be working together to address.”

Watch the full session on Taxing Digital Value here.

  • Global tax policy on digital services has to be multilateral – and should be more carrot than stick, Josh Kallmer, Zoom’s Head of Global Public Policy and Government Relations has said.
  • He was speaking...
UNCDF

On 16 March 2021, the UN Capital Development Fund (UNCDF) and the United Nations Office of South-South Cooperation (UNOSSC), funded by the India-UN Partnership Fund, partnered to digitalize utility payments and thus drive digital and financial inclusion for many of Zambia’s underserved customers. Both organizations aim to work with Zambia’s Ministry of Finance (MOF) to increase the availability and usage of utilities for women and youth, in particular.

 

Utilities, such as water, energy and sanitation, are essential services but in many parts of Zambia, these services are not easily accessible for various reasons, including the mode of payment available. Utilities are primarily paid for in cash, which can pose limitations for women and young people as they often do not have control over household finances. Digitalizing utilities payments can bring immediate benefits to customers, such as:

  • increased affordability of the service(s);
  • increased penetration utility services, making them more widespread;
  • improved quality of life;
  • improved livelihoods by empowering customers with digital and financial skills that can be used in the growing and inclusive economy of Zambia.

 

The project, which will be implemented over the next 13 months, will accelerate the development and financing of inclusive digital payment solutions in the utilities sector. This project is timely and was well-received by the government of Zambia as it will directly address specific aspects of Zambia’s National Financial Inclusion Strategy (NFIS) that are considered of ‘high priority and high impact.’ These include:

  • Designing and launching simplified products for underserved consumers through mobile based channels and others;
  • Migrating Government-to Persons and Persons-to-Government payments from cash to digital platforms.

 

The MOF and UNCDF will collaborate to develop workable digital channels and leverage existing digital payments solutions to reach more customers with the services they need. Because utility services are essential, a well-developed digital utilities sector will be a vital tool and will play a pivotal role in advancing digital and financial inclusion, especially for women and youth. Digital payments have proven to lower the cost of providing financial services to low-income people and marginalized communities, while increasing the safety and convenience of using savings and payments.

 

UNCDF, the technical assistance provider, will work with MOF, the implementing partner to design an environment where financial service providers (FSPs), FinTechs and Regulators will collaborate with the Ministry to test and implement new solutions for utility payments, particularly water.

 

Mr. Adel Abdellatif, Director, Ad Interim (a.i.), United Nations Office for South-South Cooperation (UNOSSC) says, “The India-UN Development Partnership Fund exemplifies South-South cooperation at work. Collaboration between Zambia’s Ministry of Finance and the Government of India to support building digital financial inclusion in Zambia demonstrates that countries with similar development challenges can cooperate to solve and overcome those challenges. UNOSSC is proud to manage the India-UN Development Partnership Fund which is rapidly implementing demand-driven projects across the South.”

 

“Digital payments for utilities are no longer a “nice-to-have” but a “must-have” service. Through this project, we envision strengthening existing digitalizing efforts within the utilities sector, with the objective of using utility payments as a catalyst for including Zambians who are unbanked. In addition, digitalizing utilities creates opportunities for seamless customer experiences, reduces dependency and cost of cash payments, enables faster transfer of payments and reduces collection and operational costs for utility providers. This initiative will also have a focus of supporting government to create an enabling environment towards the digital transformation of Zambia.” says Isaac Holly, Country Lead for UNCDF.

 

The Ministry of Finance in Zambia commented that, “In the wake of the COVID-19 pandemic, digitalization of payments for services in the utility sector and other sectors makes it more convenient, cost effective and safe for service delivery which is critical in arresting the spread of the pandemic. In this context, the Government has continued to implement the National Financial Inclusion Strategy which, among other things, seeks to migrate Government-to-Person (G2P) and Person-to-Government (P2P) payments and improve outreach and adoption of digital financial services. The partnership with UNCDF will, therefore, complement Government efforts in improving livelihoods of all Zambians, especially the vulnerable groups of society (women, youth and children).”

 

With a specific focus on women and youth, the project aims to enhance youth and female participation in the market, resulting in poverty reduction, improved livelihoods and economic growth. Working with the MOF in this sector also provides further opportunity to enhance UNCDF’s vision to build inclusive digital economies. The increased usage and adoption of digital utilities is expected to spur market players to expand to additional geographies around the country, thus allowing more equitable distribution of services and consequently an increased investment in the digital sector. This brings benefits to all those who are digitally included and allows them to participate in the digital economy.

 

The India-UN Development Partnership Fund recently pledged support for an initiative to create a climate disaster risk financing framework for Fiji.

 

About UNOSSC

The United Nations Office for South-South Cooperation (UNOSSC) promotes, coordinates and supports South-South and triangular cooperation globally and within the United Nations system. It manages the India-UN Development Partnership Fund at the request of the Permanent Mission of India to the United Nations in New York. The Office engages a wide range of partners toward achievement of the Sustainable Development Goals, and to foster self-reliance in developing countries according to their national aspirations and values.

 

About UNCDF

The UN Capital Development Fund makes public and private finance work for the poor in the world’s 46 least developed countries (LDCs). UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. The UNCDF financing models work through three channels: (1) inclusive digital economies, which connects individuals, households, and small businesses with financial eco-systems that catalyze participation in the local economy, and provide tools to climb out of poverty and manage financial lives; (2) local development finance, which capacitates localities through fiscal decentralization, innovative municipal finance, and structured project finance to drive local economic expansion and sustainable development; and (3) investment finance, which provides catalytic financial structuring, de-risking, and capital deployment to drive SDG impact and domestic resource mobilization.

On 16 March 2021, the UN Capital Development Fund (UNCDF) and the United Nations Office of South-South Cooperation (UNOSSC), funded by the India-UN Partnership Fund, partnered to digitalize utility payments and thus drive digital and...

WEF

Every time you make an electronic payment, whether from your mobile, online, or with a card, that transaction passes through multiple systems. Each of them plays a role in processing that payment and forms part of the sequence of checks and balances that exist between payer and payee.

It can be a long, complex and costly chain of connections, with each taking a small fee from every transaction. Typically, it involves a series of banks or other large payment processing businesses who keep track of the money on its journey from A to B. Identities are verified, creditworthiness is established and sums of money are accurately reconciled between accounts.

Without such processes, how could trusted payments take place? Enter blockchain, which has the potential to disrupt that process completely. And not just for payments, but other forms of transaction including the flow of goods and information around the world.

Blockchain can seem complicated and a little impenetrable, which is ironic as one of the core tenets of this technology is its openness and transparency.

How does blockchain work?

Blockchain allows consumers and suppliers to connect directly, removing the need for a third party such as a bank.

There are some fundamentals to understanding blockchain, including the notion of a distributed ledger. Using cryptography to keep exchanges secure, blockchain provides a decentralized database, or “digital ledger”, of transactions that everyone on the network can see. This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded.

Consulting firm Deloitte explains it as follows: “You (a ‘node’) have a file of transactions on your computer (a ‘ledger’). Two government accountants (let’s call them ‘miners’) have the same file on theirs (so it’s ‘distributed’). As you make a transaction, your computer sends an email to each accountant to inform them … the first to check and validate hits REPLY ALL, attaching their logic for verifying the transaction (‘proof of work’). If the other accountant agrees, everyone updates their file.”

In theory, it could be completely open on the public internet, or blockchain can be used within defined networks – there are different configurations for different use cases. In the latter configuration, the data pertaining to a transaction will be stored, simultaneously on the dozens, or hundreds, or thousands of computers within that defined network. That data will update in close to real time, so that anyone on the network can see everyone else’s entries.

Instead of having to outsource the idea of being able to trust in a transaction to banks and other intermediaries, blockchain puts trust out in the open by making everything visible. And because it is open and distributed, no single party on the network can exert undue control or influence on the ledger – or anyone attached to it.

It has a long way to go, though, before it really becomes part of the mainstream. Concerns around trust and regulatory compliance are among the top reasons for its slow adoption, according to the data journalism organization, Statista.

the different causes preventing people from adopting blockchain globally
The barriers to blockchain.
Image: Statista

More than money and bitcoins

Although cryptocurrencies depend on blockchain and are frequently cited as how blockchain works, they are far from being its only application.

It can be used to record and track the ownership of a photographic image or a piece of music or a patent for a new gadget. It can even be used to track the provenance of food – from farm to plate – and medical supplies, including vaccines.

IBM describes blockchain as: “A shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.”

Through its Food Trust network, IBM is working with businesses from the length of the food supply chain, including Carrefour, Nestlé and others. On the Food Network website, Chris Tyas, Global Head of Supply Chain for Nestlé, says: “People want to know, quite rightly, where ingredients they give to their baby have come from. We wanted a product in which trust meant something.”

“You are building a halo effect – ‘If I can trust Carrefour with this chicken, I can also trust Carrefour for their apples or cheese,’” Emmanuel Delerm, Carrefour’s blockchain project manager, told the news agency Reuters in 2019.

 

Every time you make an electronic payment, whether from your mobile, online, or with a card, that transaction passes through multiple systems. Each of them plays a role in processing that payment and forms part...

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